quiz2EngineeringEcon
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Simple Interest
Definition

Interest is
 linearly proportional to the principal, interest rate & number of
 interest periods
















Equivalent worth of
all cash flows relative to the time called "present"


Equivalent worth of
 all cash inflows and outflows at the end of the planning horizon at an
 interest rate that is generally the MARR


An equal annual
 series of dollar amounts for a stated study period, that is equivalent to the
 cash inflows and outflows at an interest rate that is generally MARR

Internal Rate of
Return Method (IRR)

Solves for the
 interest rate that equates the equivalent worth of an alternative's cash
 inflows to the equivalent worth of cash outflows.

Single Payment
Present Worth

P = F(P/F, i%, N)
Something will be worth F in the future, what should you pay for it now?


Minimum Attractive
Rate of Return


A family of
analysis techniques aimed at scheduling activites on a project






Allows us to
compare alternatives on a common basis

Single payment
uniform series (F/A)


External Rate of
Return (ERR)

Takes into account
 the interest rate external to a project at which net cash flows generated (or
 borrowed) by the project over its life can be reinvested (or borrowed)